he came to washington in 1993 service director of the small business administration and was later named chief of staff to president clinton. alan simpson followed his father's footsteps into politics -- a u.s. senator. a law degree from the university of wyoming -- he was elected to the legislature in 1964 and the u.s. senate in 1978 where he served three terms and was elected as majority leader. leaving the senate, he has been director of the institute of politics at harvard and has practiced law. he is the author of the book "right in the old gazoo -- a lifetime of scrapping with the press." the breakfast is being underwritten by areva, a growing player in renewable energy and nuclear energy. we thank them for their support. as always, we are on the record here.

please no live blogging or other means of filing -- to give you some time to think. there is no embargo, but c-span has agreed not to air the video of the breakfast until noon today to give those of you who actually paid to attend the breakfast time to file. finally, if you'd like to ask a question please do the traditional thing and send me a subtle, nonthreatening signal. with that, thanks again from our supporters and viewers. >> he always goes first. the times article was right about one thing -- the debt duo, if you want to know what we are really like, you can imagine sonny and cher. you can imagine which one i am.

somebody once asked me, what was it like to be president of a university? i said it is like being ceo of a cemetery. you have lots of people underneath you. i thought i would update you -- yesterday i had a meeting with a group of ceo's that we took in to meet with the white house economic team and i subsequently had a meeting with president obama.

i came away from those meetings feeling that these guys really were serious about the debt. they were serious about reducing the deficit and the need to get on with it and had some sense of urgency. they were serious about raising revenue from higher income taxpayers, and that includes raising rates, with some flexibility there. they were serious about reducing spending and i would say to you, you have written a lot about the tax side of the equation. we need to read more about the spending side of the equation. they are equally important if we are going to get a balanced plan. they are serious about reducing spending -- that would include reducing spending on health care entitlements. they are serious about protecting the middle class -- you can really feel the president's passion on that.

they were serious about restoring confidence in the short and long term so our economy can grow and create jobs. i think the president has always been for a balanced approach come as alan and i have. our message to the president and the congress from day one has been the same -- that is the problem is real, the solutions are painful, and there is not going to be an easy way out of it. the only way to solve it will be a balanced plan with cutting spending and one without the other will not work. where do i think we are? i am really worried. i believe the probability is we are going over the cliff. i think that would be horrible. it would be devastating to the economy. it particularly bothers me, given the fact i believe this is the magic moment -- if we are ever going to get a deal done, now is the time to do it -- we

have got a republican speaker who has been willing to put revenues on the table. we have republicans and democrats who have said we ought to have a balanced plan. most importantly, to get something done here in town, you have got to have a crisis. we have got one. we have got a real crisis in this fiscal cliff. i think it would be insane. i think there is a one-third possibility we will get something done before december 31. you all know what it means if we do not. if we go over the cliff, i think ll see economic growth slowed by as muc

i think that is enough to put us back into recession. it will throw another 2 million people out of work. unemployment will go to 9%. i guarantee you the members of congress and the president's economic team will hear from the business community today that they are already slow in hiring. they are already slowing investing in capital expenditure. you will see this begin to affect the consumer, consumer confidence will erode. they do not think we would be stupid enough to do that. if we do go over the cliff, you will see the stock market really crash. we will get a downgrade in our credit from moody. i am for getting a deal done and done now. and done right. where do i see the sticking points today? the president wants $1.50 trillion in revenues as part of

his deal. in the revenue package, he wants to see rate increases on the top 2%. he has some flexibility there. he has a real reason why he wants to see the increase in rates. that revenue, when you get to the congress and talk about reducing tax expenditures, every university says, all you will take away reductions. republicans want less revenues and none from rates and all from simplifying the code. the other thing that worries me about the sticking point is there have been no serious discussions yet about entitlements cuts reform except

that the president has $325 billion in his budget of health care cuts. that is not enough to slow the rate of health care to the rate of growth of the economy. we can do this. i think we must do it. it is my generation that screwed this up. we have got to be the one who fix it. i include in my generation those of you who sit at this table. we have all got some. i do not care if you are republican or democrat, a reporter or a political person. the chances are about one-third we will get it done in the lame duck. another third that we will go over the cliff. that will be bad because we already experienced a lot of

those, you will see a number of those in the fourth quarter, the affect of what is happening. the real problem is if we go over the cliff and we do not get a deal right away, that is also a one-third probability that will lead to chaos. that is where i think it stands now. we will do whatever we can to bring about the honorable compromise it takes to get a deal done that makes sense for the country that faces in these changes so we do not disrupt economic recovery, but we do put our fiscal house in order. >> thank you. a great privilege and honor to do this. through the years, gene would call and i was a freshman u.s.

senator. when i got the call for the breakfast, i tell you, my staff was cheered that i had been able to get someone to listen. that is important. working with erskine bowles is a joy. he is smart. he is the last guy on earth to balance the budget of the united states when he was chief of staff for bill clinton. he knows the game. he is a master negotiator. >> you are wearing me out. [laughter] >> i am older than you. it is a great privilege. what i am fascinated by, when this report came out, it was

deafening. what are these guys doing? they are talking about revenues, spending cuts, and we sat in that room for seven months, and we come out with five democrats and five republicans and one independent, and if you do not think that is tough to get a range like that, you do not know anything about meetings or conferences or commissions. that is what we have got. across the street was the national association of realtors. i live with a realtor. she is not doing that anymore. she was a good lobbyist. she was tremendous. they just chuckled. home mortgage interest deduction? you guys are stupid. you will get rid of us. we do not get rid of it.

take it from $1 million to $500,000. give everyone else a 12% non refundable tax credit. helps the little guy that everybody talks about. everything we did is set this, get rid of that, just remember these tax expenditures that 20% of the american people use 80% of. guess who is using them. a guy who got the best lobbyist? the best deal? they went in and cut the deal. only 27% of the american people itemize. three-fourths of the american people never heard of these things. they take $1 trillion, $100 billion a year, and suck it out of the economy. we need a stimulus.

what the hell do you think a $1 trillion deficit is? once people wake up as to what is really coming, they will savage us and the commission. do not think these interest groups are not whoring it out right now. >> we came from the witness protection program. [laughter] >> it is tough to tell people what is going on when you have a presidential debate and during the course of that, no one asked anybody what they were going to do about the long-term solvency and social security for 75 years. if you do nothing, which is the glorious recommendation of the aarp and other senior groups,

that in the year 2031, you will waddle up to the window and get a check for 25% less. who is goofy enough to let that happen? plenty of people. you have never heard a single question, what will you do with a $16 trillion debt? a question i thought was rather significant. >> the word fiscal cliff was never mentioned by candidates or one of the moderators in the debates. every day, we have a countdown. we already elected the guy.

it has to be dealt with on its own level by its own party. it is not part of solving the deficit by hitting social security and hurting seniors. it sits by its side. finally, it seems to me and my goofy attitude about life around here, that the sad part -- when you have leaders of both parties throwing out, casting out into the water the bait that says, maybe it would help the democrats if we go off the cliff. the other side, maybe it will help the republicans if we go off the cliff. i will tell you, that is like betting your country. anybody who has that attitude, they are really missing the boat. any government representative that does not realize he or she is an american first, instead of a guy raking it in and

sticking the tax code which goes only 20% of the american people, then you have a real problem in america. as long as we are in the throne of grover norquist. >> according to press reports, not talking on the phone since saturday while the white house is busy launching a new online. >> back in 1996, president clinton brought me back to negotiate the balanced budget. i met with people who were smart, and nobody believed it could be done and nobody believed we could make progress. some of you were here when it happened. we were having constant meetings with them that not everybody was aware of to

advance the ball. i can guarantee you there is no question in my mind the white house is serious about getting something done. i wish the discussions have started earlier. if you are at a corporation and had $7.20 trillion hitting your balance sheet at the end of the year, would you have started working on it in mid november? hell no, you would have been working on it all year long. we have the people in washington ready to turn their attention to it and they see

their crisis coming. i believe they will get together and have these negotiations. there are only 10 working days left. if this were in the real world and we have 45 days left in the year, you would use every one of those to work on this. you would not be going home for thanksgiving. you would be working on this every night and weekend. i hope the people will work on this and get it done. if we go over this fiscal cliff, you have bet the country. it can lead to really high unemployment. another 2 million people losing jobs. corporations will slow hiring, stop their capital expenditures, and i think you will see adverse affects run throughout

the economy. why take that chance when we do not have to? all we have to do is come together and make sensible compromises on this deal. it was dick durbin who continually asked, where is the tipping point? that came every week. he deserves a medal of honor. he has more guts. he will get punished in his party. they will pick on him. there are people waiting to take his job who do nothing to help. the tipping point is unknown. it is going to come from people who have loaned us $16 trillion. half of it is private. half is public. half is china.

the tipping point will come when they see a totally on functional government kicking the can down the road. it is a 55 gallon drum filled with explosives. you have a group called the can kicks back. look them up. they are a great group. they are addicted to money. and borrowing. we will give it to you but we want more money for our money. inflation will kick in. interest rates will kick up. guess who gets it the worst. the little guy. what is this battle about the middle class? who will get bruised the most?

the money guys will always take care of themselves. >> if we are spending $1 trillion a year on interest and health care costs continue to grow significantly faster than the economy, all of these things of my party loves so america can be competitive, taking care of the truly disadvantaged, with proper support for things like food stamps and unemployment compensation and ssi, having enough money to take care, there will not be any money there. it will all be consumed by the entitlement programs and interest on the debt. doing nothing is not an option. >> i am dying to ask another question. we will go to kevin. >> [indiscernible]

when do you except the position of treasury secretary? when will it be announced? have you been asked? more broadly, both of you, with 30 million escorts, how difficult is it to solve the tax issue and this question of corporate tax reform? has it morphed into something different than what it was? windmills have been laid out already. everybody seems to be staking out their turf. unrelated, are you related to paul bowles, the writer? >> i can answer really quickly. i am not a candidate for any job working for anybody

anywhere. i am 67 years old. i have been married 42 years. i live with my wife 22 of those and the rest of the time i have been on the road. i am going home to charlotte and i will stay there. i will do anything i can on a part-time basis to help anybody where my help is helping. i am not taking any jobs nor do i think i would be the right person to be offered it. there are a lot people for that job. as far as the corporations and the senator staking out turf for windmills, everybody is like my mama. she says, she is 92 years old, you are doing all the right things, you are fiscally conservative, you are putting the nation's fiscal health in order, but do not mess with my health care. we are all like that. we set aside the one thing that is important to us.

everything has got to be on the table. i think there is a way to handle the corporation situation. we want small businesses to be into growth. new business starts are at a 30- year decline. >> ok. >> thank you. you both spoke eloquently of compromise. back to the last time you were at the monitor breakfast, that was something that included the tax reform lowered marginal rates involving the tax space. that was the basis for the senator's compromise. he says we will produce $4.50 trillion in revenue and also have a cap on donations from the rich, $500,000.

what is your opinion of those compromises? >> you have to give them credit for putting out a plan. we finally got so exhausted in the commission with people objecting to this or that that we came to what was called the rule. instead of sitting there bitching, put in a plan. they were dazzling, some of them.

but put in a plan. the word compromise, that is all we did. kennedy and i did immigration, lots of stuff together. i love the virginity of some in my party. they are rigid as a fireplace poker without the occasional warmth. [laughter] the constitutional convention lasted weeks. the declaration of independence, when jefferson drag it out, go look at the original copy. everybody started to change it. he finally wrote what we would

call today, "whatever." if you go to a legislative body and you cannot compromise, you should never be in a legislature. you should never marry. [laughter] >> the republican house leadership has been putting forward testimony you gave from a super committee in which you spoke of an $800 billion price tag for new revenues and you generally seem to build around speaker boehner's offer to president obama. that is a bold plan. could you talk about that? >> a bunch of the american people are -- it is so frustrating for these guys. i was listening.

i did not have inside information. we were listening to this. i said, these guys can get together and do a deal if they want to. the idea there was to set out and prove to them, you can do a deal. i took the midpoint of where they were in every category of spending. as an example on discretionary spending, they were between $250 billion and $400 billion. i said, take $300 billion.

on health care, on other mandatory, cpi, to gather it was $200 billion. in trust, about $400 billion. $1.80 trillion worth of spending cuts. you add that to the $1.30 trillion already done, that is $3.10 trillion. you take the speaker and the president on revenue, $3.90 trillion. it does not change the fact that we have got to make social security sustainably solvent. we have got to reform a tax code and simplify it to make it more competitive in a global marketplace spirit it was a good start. that was the point i was trying to make. >> you mentioned some flexibility. can you explain what you mean by flexibility? >> i heard it. i do not think they would have

said it to this group if it was not real. i heard it not only from the team but from the president. they talk about, this deal will not get done with both sides being absolutist. it must not be a real word, because i cannot spell it right. they are going to have to be compromising on both sides. the white house really believes to its core that the revenue ought to come from the wealthy.

i have not met a single wealthy person who is not willing to pay more in revenue. i have not. not one. that includes me. or even to pay higher rates in most cases. the white house wants to make sure that revenue comes in, that it is real. their belief is the only way you can make it real is to have it in the form of higher rates. it does not all have to come out in the form of higher rates. some of it could come out in the form of deductions. as an example, it is a great theory that you get rid of all of these tax expenditures. you try to get rid of the charitable production, and you want to unite the rich and the poor, the universities and hospitals, so maybe you would not get it done.

you would end up excluding some form of it. if you lived in a high tax state and you want to do something on these mortgage interest deductions, state local taxes, you might end up having compromise. he wants to make sure it is a real. he is not opposed to some of it in the form of tax expenditures, but he wants some portion of it in the form of higher rates on the top 2% so the revenue is there. the conservatives are saying, i guess i could do that, but i do not want to see it "wasted," to bloat government. if they are assured, even the constituents will understand what will happen.

>> he knows. one of the things that was said by one of the members of the economic team, they know they cannot be the naked stand-alone. >> you can tell the difference. if you are naked, you do not have any clothes on. if you are "naked," you do not have any clothes on and you are up to something. [laughter] >> [indiscernible] the nation's creditor, they thought the government could not function. a week by week litmus on the capacity to compromise. [indiscernible]

>> i think it has. there is nothing new under the sun as to what we did when we started december 1, 2010. the tipping point is real. it could be two years. it could be three straight months. when it comes, the money guys, a lot of things go with it. i do not get all of the elements of panic that go with that. when people in good conscience say, i think we can get this done, with a constitutional amendment to balance the budget, forget it.

it is a nice idea. you have got six or eight years, and you do not have six or eight years to mess around. there is no time to do it. a nice idea. sterile in practicality. >> for me, i like that fact. i hope i never see another article talking about title reform. >> if they come up with a solution, what would be the consequences on the economy? is there anything that should be part of the agreement?

>> from my viewpoint, there is a one-third probability we will get it done. the business people i talk to, they do not act like that is not without consequences. it is. as soon with the representative did-it was bold. i like the fact that he recognizes revenue has to be part of the game. what he should be sure of is that will talk to democrats think they have to recognize and have a tough to be part of the game. we are already taking actions. replacing people. them. this is a to-end sortit is not as bad as having real chaos. does that solve anything? it does not. you go over the cliff, and you competitive.

slow the rate of growth of health care. what would be the consequences? also, is there anything that should be in the final agreement pelletize the above it to the constitution? is there anything that should be part of the agreement that will ensure us winding up of the same place could years down the road? >> from my viewpoint, i have said for some time there is a 1/third piece -- probability we will get it done. and 1/3 probability we will get it done right after we go over the cliffs.

the business people i talked to say do not act like that is without consequences, it is. we are already taking actions, and you will see those action show up. as an example, they will tell you we have not started firing people yet, but we are not replacing people we're losing through attrition. we of slowed capital expenditures, will not stop them. going over the cliff and getting a deal right away is not without its own negative consequences. it is not as bad as we go over enough and have real chaos. if they decide here in washington they're going to play small, what i mean by that is the idea is they will fix 90

billion. they are going to -- you have to fix amt numbers. we will fix the sequester, about 110. they can come up with 220 billion, but if you think about it, it doesn't solve anything? it really does not. you then have the decoupling, but you have not done anything to reform the tax code to make it more globally competitive. you have not done anything to slow the rate of growth of health care. that is going to eat the budget of life. you have not done anything to make social security sustainably solvent. you have not addressed the dreaded debt ceiling. you bet your life when the ceiling comes up, when you have not done any of that stuff, you talk about the leverage changing in this town pretty

quickly. confidence in the marketplace is a big deal. >> there is another thing. they do not have to come out here with a piece of legislation right now. that would be great. they need to come out with a sheet of paper signed by an equal number of democrats and republicans from each house, or pretty close. something that shows both parties were deeply involved in the plan. does not have to be big words. it has to be signed by both parties. write it on one sheet of paper. here is what we will do. here is the fail-safe.

here is the trigger. we will do this and this. signed by an equal number of democrats and republicans, which will relieve the anxiety of the country, the creditors, the people who are out there. i heard years ago, small ideas have no power to inspire. the american people are waiting to be inspired. they are thirsting for somebody to tell them the truth. we often say, pull up a chair. at the end, they are thirsting for somebody to tell them the truth, instead of the hogwash from both parties. anybody can discern they are

largely b.s. >> if we kick the can down the road or do something that is not real, it will not fool you. it will not fool the american people or the markets. whatever we do, we have a lame duck, it is a framework deal, it has to be real, has to have real clarity, substance, a real down payment, both revenue and entitlement cuts, it has to have a timeline. it does not get easier. it gets harder. you are going to have to have a fail-safe provision. it is not like the one was had with the sequester. something that is acceptable. i think you will have to solve this debt ceiling issue as part of this deal.

>> [indiscernible] a political decision. there were 10 members [indiscernible] they voted against simpson- bowles. [indiscernible] you said -- [indiscernible]

i do not see that tom has had parades thrown in his honor. [indiscernible] paul ryan goes the other way. give a dynamic of where we are right now. the final question is why is it simpson-bowles and not bowles- simpson? >> i will take the latter first. the reason is not bowles- simpson is the acronym for that is not appropriate. [laughter] simpson-bowles means son of a bitch, so it makes no difference. this council and others, it is

to back these guys up who have the guts to do this. no one knows politics better than you. we have worked together for years. there is a political price. these groups will begin to circle. we will raise more bucks to be right there at their backs until our backs cave in. if the tipping point comes and we go over the cliff, the people in america who are looking around when they go to borrow money to send their kid to community college and it has gone up 2% interest rates, they will say, who did this? what a jerk allow this to happen? they will say, you were the rigid one who would never do anything and we will take it out on you. i hope it does happen. i think the guys who have the guts to go big or go home, we

will protect them. being any thoughtful american, that is where we are right now. we are pretty optimistic. durbin will take heavy pounding. so will the rest. they all go home. the good ones have town meetings and speak for five minutes and stay for two hours and let people show them. i have done that for years. they will say, i did not agree with you at all but you came in and ask questions. i will continue to do that the rest of my days.

i always did. did you hear what joe biden said? i said, what did he say? they say, he got his foot in his mouth. i say, i have done it more. we have got to be who we are and take the stuff. >> the best part about spending the last two years on the road with this american treasurer is we have gone to see liberal groups, conservative groups, business people, ordinary citizens, every stripe you can imagine, we have had a chance to talk to.

we have had a chance to educate a lot of people about what the real problem is. i think you are right. there has been no punishment. i think people are ahead of politicians. that often happens. if they appreciate anything about what al and i have done, it is that we have been honest with them. there is no easy way out. they ask us what we need to cut and we were very specific. the defense department has to be there. we have been very specific about reforming the entitlement

programs and making the real cuts. not cuts for things dick durbin would say. there are things he hated worse than the devil. we were candid about the tax code. at the end of every time we talk, without exception, we get a standing ovation. they are desperate for somebody to tell them the truth. that and other things other people have done are beginning to have a real effect. the politicians who think they can get away with ducking the issue or taking a pass. >> follow up on your one-third comment. can you elaborate [indiscernible] the negotiations, the amount of deviation from party lines, why are you saying that? can you react to the white house this week [indiscernible]

we do not look at that. >> yes, sure. most of one-third probability we will get something done before the lame duck. at least one-third. i would not put me down in the optimistic category. i think it is critical for the country. the pace of the negotiations, these guys will be in town 10 more legislative days. there is a lot to be done. if this were any business or family, if they had a problem as big as this, they would have been working all year together. that is number one. two, it is still a part. there is still a bridge we have to close. can we close it in two hours? if you put dick durbin and tom in a room, and say, you cannot

come out until you have got a deal, those two people, as far apart as they are philosophically, they would cut a deal. they are the guys who put their careers on the line to support this. your question about social security, i do not think people are taking social security off the table. what they do not want to see is social security being reformed in order to reduce the deficit. they want to see social security reform to save social security to make sure it is sustainably solvent for the next generation. i think it is a parallel process, but it would not be done as part of the deficit reduction, but you would still

be focused on getting social security for the long-term 75 years solvency. if you cannot take a system that has a life expectancy of 63 with a retirement of 65, and you now have a life expectancy of 78.1, and you cannot do something about it by raising the retirement age by the year 2050 without shrieking from the senior organizations, well, they will. unless they have rocks for brains. this will be 67 retirement in 2027. that is present law. we put together a package which takes care of the lowest 20% of society. giving the older from 80 to 85, giving them an extra 1%. keep going if you want.

change the cost of living allowance. do some things to make the rich pay more and the less pay less. the system is $900 billion in negative cash flow in the next years. how unfair is that from these groups? there it is. >> let me close. people want to ask questions. i want you to have a chance to respond to a critic. natalie, the nobel laureate, has been describing your work. she says, despite years of dire warnings from people like alan simpson, we are not facing any kind of fiscal crisis. u.s. borrowing costs are at

historical lows with investors willing to pay the government. reducing the budget deficit is not the top priority for america at the moment. creating jobs is. your response? >> you are more calm than i am. you can respond to that. he didn't know who the hell i am. he savaged me from the beginning. i notice when he goes on the talk shows, nobody listens to him. that must have some bearing. [laughter] he has been consistently critical of our efforts. what he has not focused on is what we really have proposed. just look at the two guiding principles. one was that we did not want to do anything that would disrupt the very fragile economic recovery.

so we phase in our recommendations over a long time. the u.k. did a lot of the same things we did, but they did too much too quickly. therefore, it led to, the austerity led to a contraction in the economy. you have to spread it out over a much longer period of time. the second point i would make is that the second principle we have is that we did not want to do anything that would hurt the truly disadvantaged. if you look at our plan, we do not have any cuts. food stamps, ssi, unemployment insurance, social security, we raised the minimum payment. we gave people between 81 and 86.

every democrat told us the private pension plans run out and we need extra help. we try to do the right things. it does not mean some of the things we are recommending are not painful, but they have to be. the problem is real. we have tried to make every recommendation made when it comes to revenues so the task code would not be less progressive than it is today. we are willing to, that is part of a recommendation. we believe people in my income tax bracket have got to pay more, whether it come from reducing rates and reducing tax expenditure or raising rates, so i think, if you look at its and you are worried about the future of the country, you know you cannot continue item for item forever with annual deficits of over $1 trillion a

year. compound interests will kill you. if interest rates were at the same level they were in the 1990's, the median level, or the first decade of this century, we would be spending $650 billion on interest. we only taken $1.30 trillion in total income tax revenue. if you want to put it on a relative basis, $230 billion in interest today is more than we spend, the department of commerce, education energy, homeland's security, interior justice, and state combined. it is a big deal. if you are concerned again about making the investment paul wants to make sure we make in

education and infrastructure, you have got to slow the rate of growth in those areas and raise revenues. take revenues from people like me. i realize there is a debt and deficit problem. merry christmas. [laughter] >> we have run out of time. we want to thank you both so much for making time for us. >> thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> several live events to tell you about this morning. from london, the latest inquiry these -- releases its report on british media practices, which included phone hacking of people in the news. that is on c-span 2 at 8:30.

on c-span 3, the impact of hurricane sandy from members of congress. in a few moments, today's headlines in your calls live on "washington journal." the house doubles and four legislative speeches. the chamber will take up of the said measure to hold events degrees in science, technology, engineering event math. -- and math. live coverage here on c-span. it about 45 minutes, -- in about 45 minutes, julie rovner on the health-care law. health-care law.